MikeGarrison,

Thanks for your input. I can't see why it is so hard for these guys to understand that a warranty is the manufacturers expense.

The price of a product is dictated by market conditions, supply and demand. If you demand a product and are willing to pay a price for it, the company will obviously make a profit. If the Company chooses to allocate some of the revenue to advertise warranty and PAY for that warranty, then that is their decision and an expense that the COMPANY is taking on.

A COMPANY DOES NOT HAVE TO WARRANTY A PRODUCT IF THEY DO NOT WANT TO DO SO. As far as whether I would buy a car without warranty is a different matter. You guys need to learn how to read and understand statements in context and not imply different meanings to them.

 

I agree... no one can truly be that dense.

As a wise man once said, "Never argue with a moron... He'll only pull you down to his level and beat you with experience."

 

You are clueless. An "extended warranty" is an insurance policy. It can be sold by a manufacturer, by a dealer, or by a third party.

 

No, they CANT increase their product costs. Not by much, anyway. You seem to have no clue about the free market. "Supply and demand", ever hear about it?

If they increase their product cost, they sell fewer units. So their profit goes down anyway.

The actual response is either that they improve their engineering or that they go out of business.

 

Not quite true. All emissions components have a mandatory warranty. And some states have laws about "implicit warranties". But your statement is true in general.

It's all about risk. When you buy a car, there is a risk that things will fail. in order to make the car more attactive, the manufacturer offers a warranty. They accept the risk of failure.

Once the warranty expires, the owner then accepts the risk. However, they can choose to buy insurance called an "extended warranty" which transfers that risk to the outfit selling the policy (which could include the original manufacturer).

(There is also another model, which is that the manufacturer agrees to provide all service, routine and otherwise, for a fixed price. This has the same effect -- it transfers the risk from the buyer to the seller. Think of this as the "HMO" model.)

Some brands have more perceived risk than others. The way the manufacturers counter that is by offering longer warranties. That's why Hyundai offers 10/100 and Honda offers 3/36 -- people trust Honda more and are more willing to accept the risk.

However, all of this is "forward looking". What happened in the past DOES NOT MATTER, except that it provides an estimate of what might happen in the future. If a company sells a lemon and loses a lot of money in warranty claims, they do not make up their losses by raising the prices in the future. In fact, sometimes they hurt their reputation so much they have to respond by lowering their prices and/or offering longer warranties.

I work for a manufacturing company -- I know how it goes. In order to compete in the market, you have to offer the market price. If you screw up and have to pay out a lot in warranty claims, it hurts your profits. It does not raise your prices. Anybody who simultaneously makes a bad product and raises prices will go out of business, very quickly.

So now how about the case of a company that does warranty work for a product that was broken by user error? That's what we are talking about here, right? Well this is a matter of marketing. A company can choose to have the reputation of "standing behind their products" and paying out for all sorts of things, or they can choose to have the other reputation. This does affect the price the market will bear. The company will usually charge more, not because they HAVE to charge more, but because they CAN charge more. On the other hand, they will also pay out more. But again, this is all forward looking. It all depends on what you think will happen in the future, not what has already happened in the past. That is only important because it helps set your expectations.

 

But that argument is only applicable to those who will not pay more for the car than Honda currently charges.

I interpret most of the posts that are vocally against blanket warranty policies as suggesting that the posters would pay more for the car if they had to. They are against such warranty policies because the posters do not WANT to HAVE to pay more for the car that they WOULD pay more for in exchange for better warranty coverage.

Ever had a problem with a Boxster? All of my friends who have those cars get rediculus warranty coverage. Wiper blade squeking? Want new wipers? How about wiper arms? Maybe you need a new windshield? Nah, not the windshield, but seriously, Porsche seems to have incredibly generous warranty coverage for just about anything. Ive also been told that about 25% of a Boxster's cost goes directly to covering its future warranty claims, but Ive got no insight if that is an accurate amount or not. The difference is that Boxster owners seem willing to pay for the coverage.

So yes, if people will pay more for the car, extraneous warranty coverage will likely drive its price up. If market demand will not support the costs associated with such coverage, the warranty coverage will likely not be there.

 

Yeah, there is a connection. Just not a direct connection. It depends on future expectations, not past actions. It also depends on the marketing strategy -- the high price / high service strategy only works for low volumes.

The dealer still can only charge what the market will bear, but he can try to use the service reputation to encourage the market to bear more.

This is a complicated subject, because it is not true that every dollar Honda spends on warranty claims will get passed on to the next generation of car buyers, but it is also not true that Honda's reputation for service and reliability do not affect the market price.

 

Mike Garrison,

I'm glad you're out there.

I can accept the fact that not people will misunderstand business concepts. I tried to explain it to them, and you further dissected the topic. Yes, it gets more complicated, but inherently and essentially, we understand the purpose of a manufacturer warranty, and that's what we're talking about.

If the others cannot see it by now, they probably never will unless they go to business school, or go back to a better business school.

I'm done with this topic.

 

The bottom line is this guy made a claim that wasn't supposed to be covered and if that happened often enough would raise the price of one or both the price of the car or the extended warranty.


No one misunderstands business concepts here. You're just trying to get a rise out of people. Warranties are not insurance, even extended warranties. Honda knows they need to offer an extended warranty for people who don't trust that there vehicle will remain trouble free so they created an extended warranty.

But I'm glad to see that you, being one of the only a few people supporting your stance is finished with your awful spin.

 

This thread reminds me of:

"If i ride the subway it won't cost anything to the subway company, so why pay for the subway ticket ? "

Isn't it obvious that if car companies as a whole were being hit by millions of warranty claims such as the one from the thread opener, they would HAVE TO rise the price of the warranty, or else go bust ?

Though one such warranty claim will have no impact at all, large numbers will. You can therefore say that each such claim contributes to a potential risk of cost increase.